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Indirect commercial property investment begins recovery

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Research by Scottish Widows suggests a recovery in the indirect commercial property sector, with over a quarter of IFAs who had previously suggested clients reduce their property exposure, now recommending property again.

Around 39% of UK IFAs have advised some or all of their clients to reduce their property exposure over the last six months, but 28% of these have now returned to backing the asset class.

Only 16% of IFAs polled expect returns from indirect property to pick up ahead if those from direct property. UK property shares are currently discounted by around 25% and SWIP expects this market to rebound ahead of direct bricks and mortar.

Vicky Watson, manager of the SWIP European real estate fund, said: “Advisers need to understand how indirect property performs differently to direct property and how both assets can be used effectively.

“Looking at the outlook for indirect property, the fundamentals of the listed European real estate market remain sound. We are already witnessing tentative signs that the market is turning the corner and since the start of the year it has been one of the best performing asset classes.”

Watson added that property shares are more influenced by short-term movements in the stock market, meaning they saw a more market downturn compared with direct property as sentiment fell in the second half of last year.

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